What Does Microsoft's Newest Research Mean for GoPro?

The relationship between a long-time tech heavyweight and the new company on the block is getting interesting.

Aug 11, 2014 at 6:04PM

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GoPro's Hero 3+ Source: GoPro

Today, action enthusiasts and GoPro (NASDAQ:GPRO) investors were treated to a nice surprise courtesy of Microsoft's (NASDAQ:MSFT) research labs. The company presented a rather novel solution to a problem that plagues GoPro users the world over: How to speed up time-lapse videos but eliminate camera shake. With GoPro singling out Microsoft's Xbox as a way to beef up its content distribution strategy, do signs point toward a much stronger relationship going forward?

The science
For the casual YouTube watcher, it might seem like as soon as somebody puts a GoPro camera on something awesome happens. In reality, it doesn't. In many cases, there are hours upon hours of viewing that becomes rather monotonous when viewed at normal speed.

Of course, a simple way to offset the monotony is to use a time-lapse function to speed things up. However, time-lapse can accentuate the shakiness of the movie, making it sub-optimal for first-person videos. Microsoft Research virtually solves the shakiness problem via its proprietary algorithm, resulting in an action-oriented, non-monotonous video that you can watch without all the jarring camera shaking.

This relationship is getting interesting
It appears these two companies are forming a partnership of sorts. That makes sense--after all, GoPro is a highly skilled device maker that is looking to monetize its content and needs reliable and deep-pocketed partners with which it can form distribution agreements. Microsoft has always had problems on the device front, from the Zune to the Windows Phone to the Surface tablet that was credited with costing former CEO Steve Ballmer his job. Looking at competitors Apple and Samsung, it becomes painfully obvious that Microsoft missed the mobile revolution; for all intents and purposes its only hit device is the Xbox.

And that's what GoPro is targeting for content delivery. GoPro specifically mentioned Microsoft's Xbox in its S-1:

For example, in the first quarter of 2014, we entered into an agreement with Microsoft to develop and launch the GoPro Channel on Xbox Live, a leading delivery system for IP video streams on connected televisions, that will provide us with access to advertising revenue, fees from third-party sponsorship of the GoPro Channel and the ability to sell our capture devices directly to consumers as they watch GoPro programming.

The Xbox could use some help
It isn't as if GoPro is the only beneficiary from this partnership. Microsoft's Xbox One console is faring rather poorly versus Sony's PlayStation 4. VGChartz reported that the PS4 has sold over 9 million units from its debut late last year, compared to only 5 million Xbox One sales as of the company's most recent update. Even worse, the Wii U is now beating the Xbox One in weekly sales thanks to renewed interest from the new Mario Kart 8 game.

Initially, the Xbox's struggles could be explained by price. The initial Xbox One unit came with the Kinect peripheral and cost $499 -- $100 more than the PlayStation 4. However, this year Microsoft released a version of the unit for $399 without the Kinect device and is still being outsold by Sony.

The Xbox One is in desperate need of differentiation. If the company can add value by pairing with this new brand, perhaps it can invigorate sluggish sales of its Xbox unit as well.

Final thoughts
On the surface, this sounds merely like another cool win for GoPro enthusiasts. However, when combined with the prior announcement of the GoPro channel on Xbox Live you start to see the broad outline of what could eventually be a strong partnership. That's great for GoPro investors who need the company to monetize content to keep its lofty valuations from cratering and taking the stock price with it.

And although Microsoft's Xbox is a relatively small part of its operations, you can bet the company is looking for ways to set it apart from the competition. In short, the GoPro partnership could be a win-win for both the hungry upstart and the software giant.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Jamal Carnette has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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